Penguin-Random House Fusion

Independent authors are successful because they sell an inexpensive product in a creative way (using technology to circumvent the established publishing industry). People are simply more willing to take a risk on a $2.99 book than they are on a $14.99 book. That is the self-publishing advantage. That advantage is not dooming the publishing industry, but major book publishers must face two realities: A) their product is overpriced and B) their industry is inefficient and uncreative.

Perhaps because of this, or in spite of this, Penguin and Random House are merging.

They claim authors will benefit from this merger—that they'll get “better service.”

Can one 4-billion dollar corporation take care of authors better than two 2-billion dollar corporations can? Can the one do what the two couldn't?

This merger will take years. It won't be approved (if it is approved) until next year, and even then it'll take a while for everything to get sorted out, so what can we expect in the meantime?


As the articles suggest, this could be the first of two or more consolidations in the publishing industry. Several other large publishers could merge, especially if the new Penguin-Random House is immediately successful—they'll want to capture that lightning in a bottle, and continue to compete.

If having a “Big Six” was bad, having a “Big Three” or “Big Two” will be worse. The problems Penguin and Random House had with authors will grow worse after the merger. Royalties will go down, not up, and publishers will be even less willing to take on fresh talent. The bigger these companies get, the more they'll have to stick to old business practices, doing what worked for them before, which means selling the same bylines to the reading public.


As with any merger, they will cut where they can.

Employees (people to you and I) are going to lose their jobs in the background mechanics of either company. Penguin and Random House benefit financially by cutting salaries in places the companies overlap, and I'm sure a major publishing company, when properly motivated, can find a lot of unnecessary jetsom.

Efficiency demands this happen, but I do not imagine the extra savings will be thrown at authors. Instead of using the larger revenue and market share to take chances on unknown authors, it'll be used instead as an advantage in negotiations.


Amazon keeps things cheap, benefiting readers, by basically ripping off publishers—at least from a publisher's point of view. Self-published authors have a way around this, because they don't have the overhead of a publishing house (paying all those employees), and so can afford to give Amazon a 30% cut. 30% for a giant corporation is a bitter pill to swallow. But now, with 40% market share, this new Penguin-Random House behemoth can have a little room to work.

Amazon still has the advantage, of course, especially as they begin to soak up more self-published authors (they're practically their own publishing house). No matter how big any one publisher gets, Amazon is still the leading distributor in the world. Amazon will be hurt less by losing a publisher's business, than a publisher will be hurt by losing Amazon's.


Penguin-Random House will find more success bargaining with authors. They can force authors to take a lower royalty in exchange for a broader audience. The logic is that authors will have higher sales, and thus more money, but let's be honest: it's hard selling books, and any promise of this nature is wishful thinking.

Unlike Amazon, individual authors and agents won't have a choice in the matter. They'll have to take the lower royalty or walk away to another, smaller publisher, less able to market the same book; or self-publish with Amazon, and lose the glam that comes with a major imprint.


What publishers need is more freedom to take risks, but size won't help them do this if they're unwilling to change their culture. More money doesn't mean greater flexibility, it means more pressure to succeed.

And so Penguin-Random House will squeeze a little more money out of the system now, but at the risk of sacrificing future market share to Amazon and self-published authors.

Are Penguin and Random House merging because they don't think they can continue on as things stand—that they must unite to do battle against the self-publishing industry and Amazon? That's open for debate. They could just see an opportunity to make more money while they can make it, or they're hedging their bets. Whether this is a tactic of war, borne of necessity, or an act of convenience, it means a big change for authors expecting to get a slice of the published pie, and even for authors who choose to go it their own way.

We've seen a lot of change in the publishing industry in the last few years, and now we're seeing the first inklings of the changes to come. The largest publishers in New York are finally reacting. It's their move now, and they're starting to make it.

When the dust clears, self-publishers and Amazon (as well as Smashwords and other e-publishers) will have their turn again, but don't count on them waiting to make their move. The smartest ones will already be jockeying for positions in this new world order.

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4 Responses to Penguin-Random House Fusion

  1. Hello sir, wondered why I had not seen you on face book guessing your sticking to google +? Anyway sorry not been about much have had two months off work not been well. Good article mate will be interesting to see what happens. Miss ya on FB

  2. Great post and you make great points! I agree; the bigger they are the worse it will be. It will be terrible to see a Big 3 or Big 2 rather than the Big 6. But this tells us that they are feeling the pressure. Who knows, in the midst of all of this, maybe something else new will come out of it. It is definitely going to be interesting to watch, and I think this will make more opportunities for Indies.

    1. I'm looking forward to everything that may happen. We'll at least never be bored with where the publishing industry is moves to.


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